China cabinet to curb risks in online finance, share-backed loans

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A map of China is seen through a magnifying glass on a computer screen showing binary digits in Singapore in this January 2, 2014 photo illustration. REUTERS/Edgar Su

BEIJING (Reuters) - China will continue to resolve financial risks in online lending and the use of shares as collateral for financing activities to protect market stability, the state council said on Monday.

The government will speed up the development of a long-term regulatory mechanism for internet finance, the cabinet said in a post following a meeting of the state cabinet’s Financial Stability and Development Commission (FSDC) chaired by vice premier Liu He, adding that risks in online lending were under control.

The meeting comes a few days after a central government work group tasked with cracking down on online finance risks proposed 10 new measures to curb risks caused by the troubled peer-to-peer (P2P) lending sector to protect social and financial stability.

At least 243 online lending platforms have gone bust since June. Across the country, people who had lost life savings investing in collapsed online P2P lending platforms hit the street to protest, but most of the demonstrations were quickly snuffed out by the authorities.

In the statement on Monday, the state council committee also said China will further deepen reforms of its capital markets to better serve the real economy.

That include measures to improve the quality of listed companies, reform stock issuance system, and broaden long-term and stable funding sources for the country’s capital markets, the cabinet said in the statement.